Edwards Bets Big On Investments

Monday, November 05, 2018

Greater Irvine Chamber Leaders Circle member Edwards Lifesciences Corp., Orange County’s largest public company with a nearly $30 billion market value, is also one of its fastest-growing public companies, both in sales and stock growth.

The Irvine-based medical device giant, which employs over 4,600 in OC, had two-year sales growth of 29 percent for the period ended June 30, with $3.5 billion in sales.

The percentage gain was fourth-best on this week’s Business Journal ranking of the fastest-growing large businesses.

More is in store, according to Chief Executive Michael Mussallem, who’s led Edwards since it became an independent company when spun out of Baxter International Inc. in 2000.

Mussallem told the Business Journal last week that Edwards is “committed to the long-term and invests that way.” Notable investments include a sizeable expansion of its headquarters, a continued hiring push inside and outside of OC, and a healthy amount of research and development funding for its growing line of heart valves.

“We plan to aggressively invest internally,” he said, speaking after the company released its third-quarter earnings report.

Edwards reported sales of $907 million, up 10 percent year-over-year and in line with Wall Street expectations.

Analysts are projecting the company will also grow sales about 10 percent next year; the company hasn’t disclosed 2019 financial guidance.

Despite a recent slip over the past month, when value fell some $6 billion from an all-time high of $36 billion, the company’s stock has still increased more than 40 percent in the past year.

That’s up from 16.1 percent last year and 14.9 percent in 2016, according to Securities and Exchange Commission filings. “That’s not a company that outsources R&D,” he said.

The company is being strategic about investments, though; Mussallem notes that bigger doesn’t necessarily mean better.

Unlike competitors, such as Medtronic PLC (NYSE: MDT) and Boston Scientific Corp. (NYSE: BSX), Edwards has chosen not to diversify its portfolio but rather to zero in on its expertise in the structural heart space.

“We stay very focused on structural heart disease and critical care … there are big opportunities to apply technology to improve their care,” Mussallem said.

“We don’t necessarily believe that bigger is better; we believe better is better,” he said.

“Staying focused has allowed the company to “understand this group of patients best, [and] understand this disease best.

That strategy is why Edwards has invested heavily the past two years in opportunities related to mitral and tricuspid valves, which lie between the atria and the ventricles of the heart. The valves are the next frontier for transcatheter intervention because they’re irregularly shaped and more challenging for traditional valve placement.

Edwards acquired Cardiobandtechnology—which it considers a potential first-line treatment for many mitral patients—from Israeli-based device maker Valtech Cardio Ltd. in January 2017, and bought Harpoon Medical in December. The two deals totaled $440 million in cash, plus upward of $500 million in milestone payments.

Valtech develops repair technology for mitral and tricuspid regurgitation, a disorder in which the heart valve doesn’t close tightly enough.

This past January, Edwards announced creating a new transcatheter mitral and tricuspid therapies unit led by Bernard Zovighian, who was previously head of the company’s surgical heart valve unit.

Edwards is targeting mitral repair and replacement, as well as tricuspid repair, to provide a “comprehensive toolbox of new therapies,” Mussallem said in January at the company’s annual investor conference.

The Cardioband technology already has European CE Mark approval for mitral regurgitation, and the company’s seeking Food and Drug Administration approval for use in the U.S.

Abbott Laboratories Inc.’s (NYSE: ABT) MitraClip, a transcatheter mitral repair device, is the only device of its type approved by the FDA.

The Chicago-based device maker recently announced trial results of the device, saying the product was shown to reduce heart failure rehospitalization in patients with mitral heart failure and severe mitral regurgitation.

“I would say we are only in the second inning,” Mussallem said.

Minimally Invasive

Edwards is a pioneer in transcatheter heart valve therapy, whereby the aortic valve of the heart is replaced through the blood vessels.

It secured FDA approval of its first transcatheter device in 2011.

The less-invasive approach does away with open-chest heart surgery using a catheter-based procedure.

The category grew 16 percent year-over-year, generating sales of $558 million in the third quarter.

The company has two promising new valves in the category: Centera, a self-expanding transcatheter heart valve, and Ultra, the latest generation in its Sapien valve product line.

Centera received European approval in February, and Edwards says Ultra should receive CE Mark approval this year.

Mussallem said the company will implement a controlled rollout of the two valves in Europe to ensure their success.

Both have yet to be approved by FDA. The company commenced a U.S. pivotal trial of Centera this month.

Deep Roots

Edwards’ roots date back to 1958, when Miles “Lowell” Edwards set out to build the first artificial heart. The device was approved two years later, and he set up Edwards Laboratories in Santa Ana. The company was bought by American Hospital Supply Corp. in 1966, and by Baxter in 1985.

To Mussallem, the company continues to be the leader in innovation for structural heart disease.

He said he sees the company as part of the larger technology community and that “we are happy to do what we can, and be what we have to be—a convener, a catalyst” to help drive innovations in the community.